Some Pengxin International Mining Co.,Ltd (SHSE:600490) Shareholders Look For Exit As Shares Take 25% Pounding

Pengxin International Mining Co.,Ltd (SHSE:600490) shares have had a horrible month, losing 25% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 28% share price drop.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Pengxin International MiningLtd's P/S ratio of 1.5x, since the median price-to-sales (or "P/S") ratio for the Metals and Mining industry in China is also close to 1.3x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Pengxin International MiningLtd

What Does Pengxin International MiningLtd's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Pengxin International MiningLtd over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Pengxin International MiningLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Pengxin International MiningLtd's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 57% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 59% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 15% shows it's an unpleasant look.

In light of this, it's somewhat alarming that Pengxin International MiningLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What Does Pengxin International MiningLtd's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Pengxin International MiningLtd looks to be in line with the rest of the Metals and Mining industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look at Pengxin International MiningLtd revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

You need to take note of risks, for example - Pengxin International MiningLtd has 2 warning signs (and 1 which is significant) we think you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com